• Not as uniquely American as we think

    It’s almost cliche to say that the U.S. doesn’t pay attention to health system models of other nations when considering reforms. Maybe so. But one might not draw that conclusion from descriptions like this:

    In Switzerland and the Netherlands managed competition in health insurance markets requires that everyone purchase health insurance, with premium subsidies for lower-income people. Insurers must accept all applicants and may sell only policies that cover a structured set of benefits. Insurers must also “community rate” premiums for their policies—that is, insurers must sell a particular policy to everyone for the same premium, regardless of health status or claims history.

    That’s from van Ginneken, Swartz, and Van der Wees in the latest issue of Health Affairs, and it’s not new information. For all our “uniquely American” ways and claims, the resemblance to the design of state health insurance exchanges is uncanny, no?

    And how are the Swiss and Dutch models doing?

    The competitive nature of the Swiss and Dutch insurance markets differs.The Dutch market shows robust premium competition even though 94 percent of the population is insured by the five largest insurers []. In contrast, the Swiss market has substantial variation in premiums even though the market is much less concentrated. The differences suggest that how markets are regulated is critically important for the success of incentives to increase market efficiency.

    The article covers much more about those regulations, including the nature of risk adjustment systems and how consumers interact with insurers. It concludes with lessons for the U.S. Among them,

    insurers cannot be expected to negotiate aggressively with providers, especially hospitals, over costs and quality of care unless they have bargaining power similar to that of providers. Insurers that sell policies in the exchanges may gain some market share, but it will not be sufficient to justify expectations that exchanges can help contain costs. It is likely that other measures will be needed to generate incentives for efficiency and cost containment.

    Both the Swiss and Dutch include more centralized mechanisms of price control than the U.S. commercial market. They don’t impose government control of all prices. For example, the Swiss have something that sounds like all-payer rates established through negotiation between insurer and hospital associations. Dutch insurers negotiate with hospitals within a global budget framework while prices for most general practitioner services are regulated.

    But who cares! The U.S. won’t follow a European model because one could never work here, right?


    • The European model is every state coming up with its own way of achieving near universal coverage. Who is arguing that won’t work here?

      • I don’t know that anyone is arguing the “that won’t work here” but the rest of the industrialized world seems to have substantially addressed this issue decades ago.

        If there’s a belief the European “model” *will* “work here” then what’s the hold up?

    • Austin:
      Does your research indicate if networks are the predominant way of making premiums more ‘affordable.’
      The ACA seems to offer the option of providing plans without networks, in which people can see any provider they wish. The law even seems to cap the amounts facilities can charge, so that balance billing is minimized.
      I find this very encouraging.
      Don Levit

    • Yes, it’s odd that the contributors to this blog criticize those who might be skeptical of the European model, yet the contributors themselves ignore the most salient feature of that model: the E.C. does not place hundreds of millions of individuals under its thumb, but leaves healthcare up to its member states to figure out.

      The E.C. approach is called self-government and self-determination, and contains the seeds of that little thing called freedom. It only contains the seeds because the member states tend to run highly centralized systems complete with the obligatory price controls and restrictions on access, both of which are guaranteed to produce a low quality, sclerotic system.

      But you never know, one day freedom and competitive markets might actually break out in one of those member states. And the potential for that alone will rank Europe above the U.S. as we implement a system to place 315 million people under a central authority for what is a local activity.

    • The disconnect between the post and the comments from RC and Alsan is too strong to ignore. Austin talks about European models not a singular European model. RC and Alsan respond as though (a) Austin was referring to a single model of universal health card and (b) that there is any such model. Clearly, he wasn’t and there isn’t.

      They also make an identical mistake in treating the actions of sovereign nations that only recently adopted a loose quasi-federal pan European structure as comparable to the actions of states that never existed independent of the national political structure. A closer analogy would be to see whether Germany allows Bavaria and Bremen to experiment with totally different health care systems, or France lets its states set up their own systems built on different economic models. They don’t. If anything, their internal political units differ less than ours (ie,Texas vs New York).

      • Jonathan,

        I was being a bit snarky in giving a very literal response to Austin’s last sentence.

        Scale matters. Bremen is around a tenth of the population of Harris County, which is in turn about an eighth of the population of Texas. No comparison is perfect. However, which comparison is less bad? Does the US more closely resemble a single European nation or all of them as a whole? How do we get from where we are now to universal coverage/access with higher value? Mimic Switzerland, or mimic Europe? This question is what all of the political fighting is about.

      • And to be fair, the ACA does allow some degree of autonomy with the state waiver system and state-based exchanges, as opposed to the national exchange from the House plan. Green Mountain Care in VT and RomneyCare in MA aren’t identical systems and will also most likely be fairly different than whatever we end up seeing in places like TX or AL.

        Of course, near universal coverage is still a requirement, but that’s also true of every European system as well.

      • Sorry, but I don’t see a “disconnect” of the kind you describe between the post and my comment. I don’t claim there’s a single European model. In fact, it’s just the opposite: I point out that the EC approach is one that leaves healthcare up to the individual countries, implying many models (most of which, unfortunately, are highly centralized).

        I’m not sure about the relevance of the EC as a loose quasi-federal structure. My point is that many wonk people praise the European model to the sky, but ignore the decentralization that occurs on a very important level. That’s the disconnect and it’s so glaring that it raises questions as to what else is ignored when European healthcare is praised.

        Btw, the U.S. itself was originally based on a somewhat loosely configured structure in some respects – remember that business about the federal government being limited to certain enumerated powers? Maybe we should get back to that concept, especially given the differences between states (i.e., Texas vs. New York).

    • “Not as uniquely American as we think” We don’t have free market medicine today or yesterday. Most of medicine is greatly influenced and controlled by government and not by the patient (third party payer). In that way we are very similar to the rest of our friends. I think at least one major individual in the healthcare ranks has pointed that out and has also made the point that we likely are more similar to Canada than a free market.

    • In cities, there are usually flagship hospitals which are known to be the best. Not many people want to buy insurance that prevents them from using the best hospital in their area. Further, these hospitals tend to be better equipped to deal with complicated cases. So, either the insurance company has to be actively involved in deciding if a case warrants the expensive, flagship hospital or the insurance company has to have that hospital in their network. This limits their bargaining power and sets the general range of prices in the area.

      In less dense areas, there may not be that much choice, so the insurer has limited bargaining power again.